NEW YORK (AP) -- Stocks rose sharply for a second straight day Wednesday on signs that the U.S. economy grew in September and that European officials are moving to support the region's struggling banks.

The Dow Jones industrial average rose 131 points. Most of the gain, 80 points, came in the last hour of trading.

Analysts attributed the rise to increasing optimism about Europe's efforts to contain its debt crisis and a pair of reports in the U.S. showing a pickup in hiring and growth in service companies last month.

The Financial Times reported late Tuesday that European officials are exploring a joint effort to support the region's banks. That triggered sharp rises in European markets, especially bank stocks.

Investors are worried that European banks could suffer deep losses if Greece starts missing debt payments, which is also known as a default. That could cause the value of Greek bonds held by the banks to drop sharply. If weakened banks pull back from lending to each other, it could cause another freeze in global credit markets, as occurred in late 2008.

The report, which came out after European markets closed Tuesday, triggered a late rally in U.S. stocks that prevented the S&P 500 from closing down 20 percent from its recent peak, reached in April. A fall that far would have met the test of a bear market.

Analysts cautioned that the two-day gain in stocks may not last, given the strains that are still affecting the U.S. economy.

"The market is trading on sentiment right now, not fundamentals," said Rob Stein, head of Astor Asset Management. "People are hoping that the bounce yesterday means that we've hit a bottom, but the problems that were in the economy Monday haven't changed since then."

Other traders pointed to meetings by the European Central Bank and the Bank of England Thursday in which officials are expected to discuss additional measures to increase investors' confidence in the European banking system.

"There's a reluctance to (bet that stocks are going to fall) when there's a chance that you'll see an announcement out of Europe to help the banks by the weekend," said Nick Kalivas, vice president of research at MF Global.

The Dow rose 131.21 points, or 1.2 percent, to close at 10,939.95. The Dow jumped 153 Tuesday after its late-day surge.

The Standard & Poor's 500 rose 20.09, or 1.8 percent, to 1,144.04. The Nasdaq composite jumped 55.69, or 2.3 percent, to 2,460.51.

European bank stocks soared, reflecting increasing optimism that European leaders will succeed in limiting the fallout from Greece's debt problems. Credit Agricole jumped 10 percent, and BNP Paribas gained 9 percent.

European markets rose broadly. Germany's DAX jumped 5 percent. Benchmark indexes in France and Italy rose 4 percent.

Reports that the U.S. economy continued to grow in September also sent stock indexes higher. The Institute of Supply Management said its gauge of the U.S. service sector, which employs 90 percent of the work force, grew in line with Wall Street's expectations. The index measures the strength of health care providers, banks, real estate, and other businesses outside of manufacturing. The ISM's index was 53 in September, down slightly from 53.3 in August. Any number above 50 indicates expansion for the sector.

Payroll processor ADP said private companies added 91,000 jobs last month. That was a slight gain from August. ADP's figures do not always predict the outcome of the government's broader report on U.S. employment in September, which will be released Friday. However ADP's report can often influence traders' expectations. Wall Street economists expect that the U.S. unemployment rate will remain unchanged at 9.1 percent.

The latest indications that the U.S. economy was growing, although modestly, pushed Treasury prices lower as investors moved money out of lower-risk investments. The yield on the 10-year Treasury rose to 1.90 percent from 1.82 percent late Tuesday. It hit a record low of 1.71 percent Sept. 22.

Energy and materials companies, whose profits depend on an expanding economy more than other industries, led the stock market higher.

Walt Disney Co. led the 30 stocks that make up the Dow with a 5.5 percent gain after a Citi analyst upgraded the stock, citing a recent pullback. McDonald's Corp. lagged, dipping 0.8 percent.

Monsanto Co. rose 5.2 percent after the seed maker reported results that beat Wall Street's forecasts. Wholesale club operator Costco Wholesale Corp. dropped 1.7 percent after its earnings came in slightly below analysts' expectations. The company said it will raise its annual membership fees in November.

Yahoo jumped 10.1 percent after Reuters reported that Microsoft is considering a bid for the company. BlackBerry maker Research in Motion also jumped 10 percent on speculation that the company may be up for sale.